China Telecom Enters 4G Smartphone Market With ZTE’s Qing Yang 2

June 30th, 2014 by Trefis Team
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China Telecom

Within days of receiving a license to launch FDD-LTE 4G services, China Telecom (NYSE:CHA) has launched its first batch of 4G compatible smartphones in the Chinese wireless market. One of the first phones available to the carrier’s 4G customers will be the new Qing Yang 2, which is one of ZTE’s bestselling smartphones. Powered by the energy-efficient Qualcomm Snapdragon MSM8926 1.2GHz processor, the new Qing Yang 2 will support both the FDD-LTE and TD-LTE 4G network standards with capabilities to deliver data transmission rates of up to 150 Mbps on China Telecom’s network. [1] [2]

Other key features in this RMB 1599 ($258) phone include 2GB of RAM memory, a 5-inch high-resolution IPS touch-screen, an 8 megapixel rear camera,  a 5 megapixel front camera, 88° wide-angled shooting, intelligent tracking and 4 cm macro-shooting. The phone will also allow users to access multiple satellite positioning technologies such as GPS and GLONASS. GLONASS is currently the only viable alternative to the U.S. operated Global Positioning System (GPS) and is operated by Russia.

See our complete analysis of China Telecom here

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China Telecom had not launched 4G services for smartphones in the country until now because the government had only awarded 4G licenses for the TD-LTE 4G standard, which was incompatible with the carrier’s existing WCDMA 3G technology. Therefore, until recently, the carrier sold only data cards to offer its 4G (TD-LTE) service. China Mobile (NYSE:CHL) is the only carrier in the country with an established 4G network because its homegrown TD-SCDMA 3G network is fully compatible with the TD-LTE technology.

Owing to network incompatibility issues and aggressive marketing by rivals, China Telecom has lagged behind in monthly 3G/4G user adds and has been struggling with overall declining subscribers in the last five months. We expect the new Qing Yang 2 to provide the necessary thrust to China Telecom’s 4G aspirations considering that the previous Qing Yang 2 smartphone attracted over 2 million pre-bookings in the first week of its launch earlier this year. We also expect the FDD-LTE trial license to help China Telecom offer faster connectivity and better data transmission rates to users and effectively compete with market leader China Mobile’s faster 4G and China Unicom‘s (NYSE:CHU) HSPA+3G, 42M  (3.75G) and 4G networks.

We have a price estimate of $53 for China Telecom, which is less than 10% ahead of the market price.

China Telecom’s Subscriber Adds In 2014

China Telecom, the third largest wireless carrier in China, has been struggling with subscriber additions since December, when China Mobile launched its 4G service on the TD-LTE standard and formalized the iPhone deal with Apple (NASDAQ:AAPL). Increased competition in the 3G market, aggressive 4G network expansion by China Mobile and incompatibility issues of the carrier’s existing WCDMA 3G technology with the TD-LTE 4G standard (the only 4G standard currently in-use in China) seem to be weighing on China Telecom’s performance.

This is evident from the fact that China Telecom has lost over 4.3 million subscribers (net of 2G declines and 3G adds) in the last five months, and its share in the Chinese wireless market has declined by over 60 basis points to less than 14.4%. In the same period, China Mobile increased its share by 20 basis points to 62.4% and China Unicom’s share improved 40 basis points to just over 23%. [3] ((Key Performance Indicators, China Telecom, June 2014)) ((Operation Data, China Mobile, June 2014)) Going forward, we expect the launch of 4G smartphone services to help the carrier regain its lost share in the Chinese wireless market. It has already launched competitive 4G plans for prospective users, starting from RMB 49 ($7.89) for 2 GB of data per month. [1]

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Notes:
  1. China formally issue FDD LTE trial network licenses, CN-C114.net, June 27 2014 [↩] [↩]
  2. ZTE Launches Qing Yang 2 With 4G LTE Support for China Telecom Users, ZTE, June 27 2014 [↩]
  3. Operating Data, China Unicom, June 2014 [↩]